AML Compliance – and why you should care
The United Arab Emirates (UAE) has been taking strong measures to combat money laundering (ML), terrorism financing (TF), proliferation financing (PF) and all other forms of financial crimes. The compliance requirements and obligations are becoming a serious concern for many companies that have reporting requirements.
The latest changes to the relevant laws in the last two to three years raised the need for companies to become more acquainted with their expected obligations. Apart from the usual regulated companies (financial institutions, insurance companies and banks), the relevant laws and regulations do expect what we call designated non-financial businesses and professions (DNFBP) to be treated as regulated entities within the context of anti-money laundering (AML). DNFBPs usually include lawyers and legal consultants, notaries, accountants, real estate brokers and agents, dealers in precious metals and precious stones and corporate services providers. The majority of DNFBPs were to a large extent ignoring their obligations under the relevant AML laws until recently and therefore we have started to notice an interest from companies to knowing more about AML and for more knowledge sharing in this respect.
Many new authorities were given certain responsibilities in the context of supervising the compliance of DNFBP’s with their reporting and registration requirements such as the Ministry of Justice for lawyers and notaries and the Ministry of Economy for the majority of the other businesses.
We (at BSA) have as well started seeing more frequent inspection visits and more training sessions handled through the various authorities which were created recently (in the last three years) such as the Executive Office for Control & Non Proliferation (EOCN) and the National Anti-Money Laundering and Combatting Financing of Terrorism and Financing of Illegal Organizations Committee (NAMLCFTC). The EOCN provides direct access to the UAE (local) and UN sanctions lists through their website and further plays an active role in implementing export control besides curbing the proliferation of weapons of mass destruction. The NAMLCFTC on the other side is the primary body for policy making and issuing regulations to combat money laundering and terrorism financing in the UAE.
Among the major latest development as well, we note the relevant improvement in the communications with the regulators especially in relation to the reporting of suspicious transaction with the Central Bank by managing such reporting through GoAML which is a secured encrypted platform created for that purpose.
In addition to the above, we definitely refer to the number of regulations that are being passed on regular basis to address the growing and everchanging risks associated with ML, FT and PF. If any, this will clearly demonstrate the commitment of the UAE Government to create a legal and regulatory framework that is on par with international standards. So all businesses including DNFBPs should be mindful about their major obligations, and which include:
Ensuring that they have appropriate AML, Counter FT, PF and sanctions policies tailored for their business and client base to address the risks they are exposed to. This shall be based on an updated business risk assessment that they carry out at least once annually or whenever they introduce a new product or service.
Putting in place efficient KYC procedures when dealing with clients with a clear framework as to how to rate client’s risk and the nature of documents they need to collect from their different clients types (Politically exposed persons, cash clients, clients connected to high risk countries etc..)
Appointing an MLRO / compliance officer who is able to take the lead on ensuring their compliance with the laws and regulations and at the same communicating on their behalf with the relevant authorities.
Training their team members to understand the importance of their role in monitoring and reporting suspicious transactions.
There is no doubt that the major developments we have listed above will require corporations to allocate a separate budget for compliance. The costs are growing year on year given the sophistication of the compliance operations and the growth of the businesses / associated risks and hence, we recommend the following:
Ensuring that you are able to understand and act as soon as possible in relation to your AML/counter FT, PF and sanctions obligations. The more you delay, the costlier the exercise will be. AML related obligations are more of an international issue and therefore they are not expected to be lightened or waived at the contrary, more pressure will be placed to improve the understanding and cooperation to fight ML, FT etc.
Be mindful about the value of using new technologies especially for KYC and screening (against sanctions lists). This will reduce extensively the costs associated with compliance, ensure sustainability and efficient results. The importance of using artificial intelligence for compliance purposes will allow corporations to avoid human mistakes, streamline their compliance operations and be able to have access to the latest technologies.
In conclusion, we urge relevant companies to take the above seriously and to be alerted as to the possible risks associated with breaches. Apart from penalties and fines, it is proven that the reputational damage associated with potential ML, FT and sanctions’ related breaches are extensively damaging and can effectively ruin a business, its partnership, banking relations and ability to access funding and retain clients.
About the author
Rima Mrad is a Partner with the Corporate and M&A practice at BSA Ahmad Bin Hezeem & Associates DIFC offices in Dubai. She is an experienced corporate lawyer who has practiced in the UAE for over sixteen years. Rima specialises in advising insurance companies, corporate organisations, financial institutions, energy companies and private equity funds on a wide range of legal issues.